Levi Strauss Q2 FY'13 sales up 5%

Net revenues increased five percent on a reported basis and six percent without the effect of currency, driven by strong performance from the Levi’s and Dockers brands, particularly in the Americas with growth across both wholesale and retail channels. 

Second quarter net income increased significantly to $48 million as compared to $13 million in the second  quarter of 2012, reflecting the higher net revenue and a gross margin increase of approximately 400 basis points as compared to the second quarter of 2012.

"We are encouraged by the second quarter’s progress—revenues up five percent and dramatically improved gross profit and net income.  The results reflect in part the key choices we made last year to focus on our profitable core business, expand selectively beyond the core and become a world class retailer," said Chip Bergh, president and chief executive officer.

"While we clearly have more work to do, we will sharpen our focus on our core brands—Levi's and Dockers—with compelling product and innovation, while also investing behind brand-building and improving the overall consumer experience, whether in our own stores or with our key retail partners."    

Second-Quarter 2013 Highlights

- Gross profit in the second quarter increased to $549 million compared with $481 million for the same period in 2012.  Gross margin for the second quarter was 50 percent of revenues compared with 46 percent of revenues in the same quarter of 2012.  The gross margin improvement reflected a lower cost of cotton in the products the company sold during the quarter, the phase-out of the Denizen brand in Asia and increased sales from the company’s retail stores.

- Selling, general and administrative expenses (SG&A) for the second quarter increased to $449 million from $435 million in the same period of 2012.  The increase in SG&A was primarily driven by a shift of the company’s advertising campaigns from the first quarter into the second quarter. SG&A as a percentage of revenue declined to 41 percent from 42 percent in the same period of 2012.

- Operating income for the second quarter grew to $100 million from $46 million in the same period of 2012 primarily due to the higher gross margin. 

- Net revenues increased in the Americas primarily due to improved performance of both the Levi’s and Dockers brands at key customers in the wholesale channel and in the company’s retail stores. Higher operating income primarily reflected the region's higher gross margin due to the lower cost of cotton in products sold in the second quarter.

- Net revenues in Europe were flat on a reported basis, and increased one percent without the effect of currency, as improved performance and expansion from the company-operated retail network was partially offset by a decline in the traditional wholesale channel across the region. Higher operating income reflected improved gross margin driven by increased sales from the company-operated retail network.

- Net revenues in Asia Pacific declined four percent on a reported basis but were nearly flat without the effect of currency.  Sales at the company-operated retail network and in traditional wholesale channels were adversely impacted by challenging conditions in most markets in the region.  Higher operating income primarily reflected the company’s third-quarter 2012 decision to phase out the Denizen brand in the region, which was substantially complete by the end of the second quarter.